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Analysis of Nigeria’s Intra-and Inter- industry Trade in Energy Products Damilola Felix ArawomoDepartment of EconomicsUniversity of Ibadan, Ibadan,

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Presentation on theme: "Analysis of Nigeria’s Intra-and Inter- industry Trade in Energy Products Damilola Felix ArawomoDepartment of EconomicsUniversity of Ibadan, Ibadan,"— Presentation transcript:

1 Analysis of Nigeria’s Intra-and Inter- industry Trade in Energy Products Damilola Felix ArawomoDepartment of EconomicsUniversity of Ibadan, Ibadan,

2 INTRODUCTION Among the several advantages of international trade: major source of revenue Exchange rate Increase in international ties Source of factor inputs International trade has been broadly categorized into two: inter-industry trade intra-industry trade. Intra-industry trade: stimulates innovation and exploits economies of scale (Ruffin, 2002) reduces the demands for protection

3 Objectives of the Study to examine the extent of both inter and intra –industry trade in energy products in Nigeria with her major trade partners to analyse the determinants of the two types of trade

4 BACKGROUND OF THE STUDY 2.2 Destinations of Oil Imports and Exports United States of America has been the highest importing market for Nigeria’s oil exports for several decades It must also be noted that India and Brazil have displaced the European countries as receivers Nigeria’s oil exports, although there are still 5 European countries among the highest importing markets for Nigeria oil export 2.1 Trade in Energy Products Nigeria’s imports of oil products in the recent time; it has increased from N0.2 billion in 1980 to over N3 trillion in The share of oil in total exports of Nigeria was 95.8 per cent in 1980, although it declined to 89.1 in 2011

5 Table 2.1 Nigeria’ Exports of Goods and Services to the World (N Billion) Billion N Percentage of Total YearOilNon-OilTotalOilNon-OilTotal

6 Table 2.2 Nigeria’ Imports of Goods and Services from the World (N Billion) Billion NPercentage of Total YearOilNon-OilTotalOilNon-OilTotal

7 Table 2.3: Highest 10 Importing Markets for Nigeria’s Energy Products. Importers United States India Brazil Netherlands France Spain Equatorial Guinea Canada Italy South Africa Others World100

8 Table 2.4: Highest 10 Supplying Markets for Nigeria’s Energy Products Exporters United States France United Arab Emirates India Latvia United Kingdom Italy South Africa Belgium Switzerland Others World100

9 2.0 LITERATURE REVIEW Bans (2010), Australia and selected Asia-Pacific nations Amiti (1997) Gorecki (1975) Ghellinck, Geroski, and Jacquemin (1988) Balassa and Bauwens (1988) Torstensson (1996) Among other studies that have considered both inter– and intra- industry trade are:

10 3.0 METHODOLOGY 3.1 Measurement of Inter-industry and intra-industry trade Grubel and Lloyd (1975) defined Inter-industry trade as net trade : Si = |Xi - Mi| (1)

11 The groundbreaking work of Grubel and Lloyd (1975) led to the emergence of the Grubel and Lloyd index (G-L index). They calculated IIT based on the difference between the trade balance of the industry or product i, and the total trade of the same industry or product That is intra-industry trade is measured by: Where Xij and Mij are home country’s exports of industry i to country j and home country’s imports of industry i from country j, respectively. (4)

12 TRADE is the magnitude of the type of trade that exists between the trade partners. GDP is the natural endowment in the host country GPER is the per capita in the host country GGRT is the rate of growth of the GDP WDIST is the weighted distance between host country and the respective trade partners REER is the real effective exchange rate of the host country FDI is the inflow of FDI from the trading partners to the host country Where: 3.2 Model Specification Following Balassa and Bauwens (1988), the modified gravity model is given as: TRADEijt = GDPit + GPER it + GGRTit + DISTit + REER it + FDIijt + LANGit + Uit (5)

13 3.3 Estimation Techniques Panel data technique will be performed by both fixed effect and random effects models and will be compared with the pool. In order to be able to choose between the possible estimation models, several statistical tests will be performed. Chow test. Breusch-Pagan, Hausman and Lagrange Multiplier.

14 4.1 Extent of Intra-industry Trade in Energy Products The computed index of inter-industry trade and intra-industry trade in energy products for 2011 is presented in Table 4.1. It should be reported that this same result is for each year between the periods of 1980 to The result show that for of the four major trade partners, intra-industry trade in energy products did not exist between them and Nigeria. United States, France, India and South Africa 4.0 EMPIRICAL ANALYSIS

15 Table 4.1 (a) Index of intra –industry trade in Energy Products between Nigeria Selected Trade Partners 2011 HS Code Product labelIntra-Industry Trade USAFranceIndia South Africa '2701 Coal; briquettes, ovoids & similar solid fuels manufactured from coal 0000 '2702 Lignite w/n agglomerated, excl jet 0000 '2703 Peat (incl peat litter), w/n agglomerated 0000 '2704 Coke & semi coke of.coal, lignite, peat; retort carbon 0000 '2705 Coal gas,water gas,producer gas,other than petroleum gases 0000 '2706 Tar distilled from coal, lignite or peat & other mineral tars etc 0000 '2707 Oils & other products of the distillation of high temp coal tar etc 0000 '2708 Pitch & pitch coke, obtained from coal tar or from other mineral tars 0000 '2709 Crude petroleum oils 0000 '2710 Petroleum oils, not crude 0000 '2711 Petroleum gases 0000 '2712 Petroleum jelly; mineral waxes & similar products 0000 '2713 Petroleum coke, petroleum bitumen & other residues of petroleum oils 0000 '2714 Bitumen & asphalt, natural; shale & tar sands; asphaltites & asphaltic 0000 '2715 Bituminous mixtures from..natural asphalt, natural & petroleum bitumen 0000 '2716 Electrical energy 0000

16 Table 4.1 (b) Index of inter –industry trade in Energy Products between Nigeria Selected Trade Partners 2011 HS Code Product labelInter-industry Trade USAFranceIndia South Africa '2701 Coal; briquettes, ovoids & similar solid fuels manufactured from coal1111 '2702 Lignite w/n agglomerated, excl jet1111 '2703 Peat (incl peat litter), w/n agglomerated1111 '2704 Coke & semi coke of.coal, lignite, peat; retort carbon1111 '2705 Coal gas,water gas,producer gas,other than petroleum gases1111 '2706 Tar distilled from coal, lignite or peat & other mineral tars etc1111 '2707 Oils & other products of the distillation of high temp coal tar etc1111 '2708 Pitch & pitch coke, obtained from coal tar or from other mineral tars1111 '2709 Crude petroleum oils1111 '2710 Petroleum oils, not crude1111 '2711 Petroleum gases1111 '2712 Petroleum jelly; mineral waxes & similar products1111 '2713 Petroleum coke, petroleum bitumen & other residues of petroleum oils1111 '2714 Bitumen & asphalt, natural; shale & tar sands; asphaltites & asphaltic1111 '2715 Bituminous mixtures from..natural asphalt, natural & petroleum bitumen1111 '2716 Electrical energy1111

17 4.2 Determinants of Inter-industry Trade in Energy Products As reported in Table 4.2, the Chow test confirms the appropriateness of fixed effects model whereas the Breusch- Pagan test advocates the use of the random effects model. As evident in Table 4.2, the resulting Hausman test statistics in the model strongly indicate that the fixed effects model should be preferred over the random effects model. As regards the determinants of inter-industry trade we turn to Table 4.2

18 Table 4.2: Regression Results of the Determinants of Trade in Energy Products Pool PanelFixed EffectRandom Effect GGRT (0.06) (0.05) (0.06) DIST *** (7.54) *** (-5.54) (0.31) GDP *** (5.46) *** (8.47) *** (6.27) GPER *** (-5.16) *** (7.93) *** (-5.92) REER (0.73) (0.78) (0.80) FDI (-0.17) ** (3.01) (-0.17) CONSTANT *** (-6.16) (-9.24) *** (-7.04) R 2, R 2 Within F Chow test Wooldridge test for autocorrelation: F (1, 32) LR-test for heteroscedasticity:X 2 (32) Breusch-Pagan LM test for random effect Hausman specification test: X 2 (6) No. of groups444 No. of observations128

19 5.0 SUMMARY, AND CONCLUSION Nigeria trade with United States, India, France and South Africa in energy products showed pure inter-industry trade. Foreign direct investment, natural endowment, and per capita income promotes inter-industry trade in energy products between Nigeria and the trade partners, while distance was found decline it

20 RECOMMENDATIONS The fact that Nigeria’s trade in energy products is completely inter- industry trade, suggest that she exports crude oil and imports refined. Efforts should therefore be intensified to refine all our crude oil in the country.. The various multinationals should be encouraged to build refineries in Nigeria Policies that can enhance refining Nigeria crude oil domestically should be pursed


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